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The National Community Reinvestment Coalition has filed fair lending complaints against 22 lenders for allegedly requiring high credit scores on Federal Housing Administration-insured loans and refusing to extend credit to qualified borrowers.
December 9
The Department of Housing and Urban Development said it will launch a fair lending investigation into a practice identified by one consumer group as lenders refusing to offer FHA loans to borrowers with low credit scores.
HUD's announcement on Wednesday came the same day the National Community Reinvestment Coalition filed complaints against 22 Federal Housing Administration-approved lenders.
The complaints alleged that certain FHA lenders are discriminating against minority borrowers by establishing a minimum credit score of 620. FHA underwriting standards only require a 580 score for its standard low downpayment mortgage.
"We thank NCRC for bringing these complaints to HUD," said John Trasvina, HUD assistant secretary for fair lending and equal opportunity.
"For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation's recovery efforts," Trasvina said.
Many lenders have set minimums of 620 or 640 to protect themselves from high default rates and servicing costs — and potential loan buybacks.
"Lenders have a right to set tighter lending standards than FHA requires," said Glen Corso, managing director of the Community Mortgage Banking Project. NCRC, a nonprofit advocacy group, has filed complaints against several CMBP members.
